February 25, 2006

Closing date extension request denied

Edwards-Decoito sued Maple View for damages and
return of her deposit

An Ontario Court judge in Newmarket has ruled that a builder should have allowed
a homebuyer a short extension of the closing date when her financing fell
through at the last moment.

Back in May 2002, Andrea Edwards-Decoito signed an agreement to purchase
140 Del Francesco Way in Vaughan from Maple View Building Corp., a division of
Grand Valley Homes. She paid a deposit of $12,250 against a purchase price of
$244,990.

The scheduled closing date was Feb. 28, 2003, and the agreement contained
the standard Tarion Warranty Corp. schedule allowing the builder to extend for a
further 240 days, until late October 2003.

Grand Valley encountered considerable difficulties in developing the
project, and when the extension time ran out, it tried to cancel 15 house deals
in the subdivision including the Decoito house.

A number of purchasers complained to the new home warranty program, which
then intervened and demanded that Maple View extend the closing dates.

In July 2003, a settlement agreement was reached and the closing dates
were extended. Edwards-Decoito's closing date was eventually set by the builder
for Dec. 22, 2003.

In the meantime, Edwards-Decoito contacted a mortgage broker who arranged
financing with MCAP Mortgage Corp. For some unknown reason, MCAP decided not to
advance funds, and the broker went to ING Mortgage Group. On the day scheduled
for closing, ING also decided not to advance funds.

Another mortgage broker became involved, and on the following day he
found a new lender, which would be in a position to advance funds on Jan. 5,
2004. Since Maple View's offices were going to be closed over the holidays,
Edwards-Decoito's lawyer's law clerk wrote to the builder's lawyer asking for an
extension to Jan 5.

The reply was that the builder had terminated the deal due to the delay
and the $12,250 deposit was forfeited.

But the builder's lawyer did request a copy of the mortgage commitment
showing the ability to close Jan. 5.

The house was relisted for sale and sold for about $50,000 more than the
price Decoito had agreed to pay.

Edwards-Decoito sued Maple View for damages and return of the deposit,
and the trial took place over four days this past November. Justice John Jenkins
found the parties by their conduct, if not specifically in writing, agreed to
extend the closing date to Dec. 22 and then Dec. 23, 2003.

He also stated that had her lawyer requested a closing date of Jan. 5,
2004, and presumably sent along the new mortgage commitment, the extension
"would have been probably granted," although the judge's basis for that
conclusion is not clearly set out.

The judge found that Edwards-Decoito had acted reasonably and properly in
her efforts to complete the transaction, but he was quite critical of her real
estate agent, her original mortgage broker, her lawyer and the lawyer's law
clerk.

Jenkins found that Edwards-Decoito's problems started with her real
estate agent who allegedly attempted to obtain extra money to which he was not
entitled. He also criticized her mortgage broker who found two lenders who
backed out at the last minute. He noted that her lawyer and the lawyer's law
clerk failed to protect her properly by obtaining a closing date extension
beyond Dec. 23, 2004.

Last month in this column I wrote about the Court of Appeal's decision in
the 2005 Loblaw Properties case, where Loblaw was a week late in delivering a
deposit to the sellers of a large parcel of land. The appeal court ruled that
Loblaw was in breach of the "time of the essence" clause in the offer and the
deal was dead.

No reference in the Edwards-Decoito decision was made to the Loblaw
Properties case. Since Edwards-Decoito's lawyer and the builder's lawyer had
exchanged correspondence about various extensions for closing, the court did not
base its decision on the "time of the essence" provision.

It was clear from the evidence that Edwards-Decoito was in a position to
close with her financing in order on Jan. 5, 2004. The judge ruled that although
Maple View consented to the "adjournment" of one day to Dec. 23, 2003, "they
ought to have agreed to an extension to Jan. 5, 2004."

That rather startling statement is a clear message from the Ontario Court
that builders or at least this builder should be flexible when a purchaser
is ready to close but genuinely needs a brief extension. The statement is
surprising because it was made without supporting reasons or prior case law.

In the end, the court awarded Edwards-Decoito the return of her $12,250
deposit plus interest. She was denied damages to compensate her for the loss of
the house.

Based on this case, it appears that builders who keep a purchaser's
deposit and resell at a higher price when the purchaser needs a short closing
delay risk the wrath of a court somewhere down the line.

The plaintiff's counsel, Harvey Ash, recently told me that the decision
has not been appealed. The parties are now making costs submissions to the
court.
Ash
was the successful lawyer for Edwards-DeCoito at trial. He was not her
real estate lawyer in the aborted transaction.

Bob Aaron is a Toronto real estate lawyer. He can be reached by email
at bob@aaron.ca, phone 416-364-9366 or fax
416-364-3818. Visit the column archives at
http://www.aaron.ca.

ONTARIO

SUPERIOR COURT OF JUSTICE

ANDREA EDWARDS-DECOITO

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Harvey J. Ash, for the Plaintiff

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Plaintiff

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- and -

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MAPLE VIEW BUILDING CORPORATION

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Wendy H. Greenspoon, for the Defendant

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Defendant

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HEARD: November 7-10, 2005

REASONS FOR JUDGMENT

JENKINS J.

[1] Andrea
Edwards-Decoito (Decoito) brings this action against Maple View
Building Corporation (Maple View) for the sum of $50,000
representing damages arising from her aborted purchase of 140 Del
Francesco Way in the City of Vaughan.

[2] Maple
View resists this action on the basis that Decoito forfeited her
deposit of $12,250 plus interest and was unable to close the
transaction on the extended closing date of December 23, 2003.

OVERVIEW

[3]
Decoito is a 41 year single mother of two children ages 21 and 14.
She was residing with her children in a rented apartment and desired
to purchase a home. She attended Grade 13 in a secondary school in
Ontario, went to a Community college earning a certificate of
occupational therapy becoming an occupational therapy assistant and
psychotherapy assistant. She contacted an acquaintance of hers
Cleveland Lewis a real estate agent, and after some negotiations,
entered into an agreement of purchase and sale to purchase a
residence at 140 Del Francesco Way in the City of Vaughan. This
agreement provided for a total deposit of $12,500, at a price of
$244,990 with a closing date of February 28, 2003. The Agreement of
Purchase and Sale is dated May 13, 2002, at Exhibit 2, Tab 1,
Schedule D , Paragraph 5, which provides the following:

EXTENTION AND TERMINATION

(i)If the Vendor cannot close the transaction by
the Closing Date in the Agreement because additional time is
required for construction of the dwelling, the Vendor shall extend
the Closing Date one or more times as may be required by the Vendor
by notice in writing to the Purchaser as soon as reasonably possible
and in any event prior to the Closing Date or extended Closing Date,
all extensions in the aggregate not to exceed 120 days. However,
the Vendor shall not extend Closing if the parties have specifically
agreed in writing that the Vendor cannot, and the Purchaser does not
waive this covenant.

(ii)The Vendor shall take all reasonable steps to
construct the dwelling without delay.

(iii)If the Closing Date in the Agreement has been
extended for 120 days and the Vendor still requires further time for
construction of the dwelling, unless subsequent to the closing Date
in the Agreement the parties otherwise agree, the Purchaser may
terminate the Agreement within the 10 days immediately after the 120
days have elapsed by delivering or mailing notice in writing to the
Vendor at the address shown above (which notice may also be given
between solicitors), and upon the giving of such notice this
Agreement shall be at an end and all sums paid by the Purchaser
shall be retuned without interest or deduction. However, if the
Purchaser does not terminate as above, closing shall be deemed to be
extended to a date 5 days following completion of the dwelling as
required by the Agreement but, unless the parties otherwise agree,
not later than a further 120 days after the initial 120 day period.
If by this further time the dwelling is not constructed in
accordance with the Agreement and if the parties do not otherwise
agree, the Agreement shall be at an end and all sums paid by the
Purchaser shall be returned without deduction and there shall be no
further rights between the parties unless the Vendor is in breach of
his covenant in 5 (ii) above to construct without delay. If the
Agreement is so ended, interest shall be payable on all sums paid by
the Purchaser, for the period commencing 120 days after the Closing
Date in the Agreement at a rate 1% below the rate paid by the
Province of Ontario Savings Office savings account as of the date on
which the Agreement ended.

(iv)Notwithstanding any provision to the contrary
contained in it, the Agreement shall not be terminated by the Vendor
by reason of failure to complete the dwelling as specified in the
Agreement within a period of time or by a date specified in the
Agreement, extended as above, unless the Purchaser consents to the
termination in writing or the Agreement is ended pursuant to 5 (iii)
above.

(v)Where there is conflict or ambiguity between the
Agreement and this Addendum, this Addendum shall prevail.

[4]
Cleveland Lewis, recommended a lawyer Mukesh Bhardwaj to handle the
transaction, whose assistant Geetha Narayan is a law clerk. She
holds a lawyer s licence in India. Lloyd J. Pollack, Q.C. was the
lawyer at Garfinkle, Biderman representing Maple View. His law
clerk was Josie Commisso.

[5] Grand
Valley encountered considerable difficulties in developing Phase II
of this project, which included Decoito s property. Pursuant to a
letter dated November 1, 2002 from Pat Della Rocca, the
administrative co-ordinator for Maple View, it extended the closing
date by 240 days pursuant to the Agreement of Purchase and Sale,
Schedule D paragraph 5.

[6] Maple
View purported to cancel 15 real estate transactions in their Phase
II development and to rebate the deposits to the Purchasers. This
however, spawned complaints by those Purchasers to the Ontario New
Home Warranty Program, who intervened and demanded that Maple View
extend the closing dates. A settlement agreement was entered into
between the Ontario New Home Warranty Program and Maple View in July
2003 to achieve this purpose.

[7] To
arrange for mortgage financing Decoito contacted Shamira Lalani, who
is a mortgage broker with MoneyPlus Mortgages & Loans Corporation.
Lalani arranged for mortgage financing with MCAP Mortgage
Corporation. On August 14, 2003, Della Rocca wrote to Decoito
informing her that her house would not be ready on October 26, 2003,
and it would be necessary to set a new extended closing date. She
further indicated that a Maple View Sales Representative would be
contacting her to arrange a convenient time for her to attend at the
Sales Office to sign the Amendment.

[8] During
this period of time Decoito s contact with her lawyer was with
Geetha Narayan the law clerk who had corresponded with Josie
Commisso the Vendor s law clerk. Narayan was also in contact with
MoneyPlus Mortgages and Loans Company to receive instructions for
the loans since Mukesh Bhardwaj was going to represent the mortgage
lender on this transaction.

[9] On
December 12, 2003, Decoito received a telephone message from Della
Rocca informing her that her home was ready for occupancy and that
the closing date would be on December 22, 2003.

[10] On
December the 17, 2003, Lloyd Pollack forwarded to Mukesh Bhardwaj
the closing documents including an Amendment Agreement purporting to
change the closing date to December 22, 2003.

[11] Decoito
was anxious to have this transaction closed before Christmas since
she was having difficulty with her landlord. She contacted Della
Rocca on numerous occasions to expedite the closing. Della Rocca
arranged with their builders to assist Decoito by working on her
house instead of one previously scheduled in order to assist on this
closing. In December 2003 Decoito learned from Shamira Lalani, for
some unexplained reason that MCAP Mortgage Corporation would not
advance funds. Shamira Lalani then contacted and arranged for
financing with the ING Mortgage Group.

[12] On
December 22, 2003, Geetha Narayan discovered that ING was not going
to advance funds and were withdrawing as a mortgagee. She had
received the closing documents from Lloyd Pollack, one of which is
at Exhibit 2, Tab 22, which purports to be an acknowledgment and
release agreeing to the closing date.

[13] The
Amendment to the Agreement (Exhibit 1, Volume 2, Tab 53) specifies
that the Agreement of Purchase and Sale closing date is extended to
December 22, 2003, and all other terms and conditions in the
agreement shall remain as stated therein . This document was signed
only by Decoito, on December 23, 2003

[14] On
December 22, 2003, when Geetha Narayan learned that ING had
withdrawn it s mortgage financing, she immediately contacted Lloyd
Pollack requesting an adjournment until December 23, 2003. She also
contacted Sarbjeet Singh, a mortgage broker who assured her that he
could arrange very expeditious financing.

[15] Sarbjeet
Singh informed Decoita that Shamira Lalani was no longer with
Mortgage Broker Clearing House and that she had made many mistakes
in the past and that he would take care of this new financing
arrangement. On December 23, 2003, he was able to arrange for new
financing with Bridgewater Financing Services Limited who would be
in a position to advance funds by January 5, 2004.

[16] Maple
View was going to close it s office from December 23 to January 5
for their Christmas vacation. Geetha Narayan requested an
adjournment of the closing until January 5 which would coincide with
the new financing arrangement. Lloyd Pollack wrote Mukesh Bhardwaj
a letter on December 23, 2003, which I duplicate as follows (see
Exhibit 2, Tab 15):

We acknowledge receipt of your
facsimile transmission of this afternoon which we have reviewed with
our client. Please fax to us a copy of your client s mortgage
commitment together with whatever information you have from your
client s mortgagee advising that funds are not available until
January 5, 2004.

Our client has instructed us to advise
that the transaction must be completed today and no extensions will
be granted. Our client is ready, willing and able to close this
transaction today and you have advised that you are not in funds and
therefore your client is not ready, willing and able to close. As a
result, your client has breached the contract entitling our client
to terminate same.

In the event that this transaction
does not close today, our client shall consider the Agreement of
Purchase and Sale terminated as a result of your client s default,
in which event the purchaser s deposit monies shall be forfeited as
liquidated damages and not as penalty. In addition, our client
shall reserve its rights to seek additional damages caused by your
client s breach of contract.

Notwithstanding that information, Bhardwaj
and Narayan expedited the execution of the documents, arranged for
the new financing documents from Bridgewater and was in a position
to close the transaction on January 5. Neither Bhardwaj or Narayan
informed Decoito that Maple View were taking the position that the
transaction was at an end. Decoito proceeded to make arrangements
to move on January 5.

[17] Bhardwaj
forwarded the closing documents on January 5, 2004 to Pollack
including the arrangements for the financing. The documents were
returned by Pollack who took the position that the transaction was
at an end and the deposit had been forfeited.

[18] The house
was re-listed by Maple View and re-sold at a price approximately
$50,000 more than the price agreed upon with Decoito.

THE POSITION OF THE PARTIES

[19] Mr. Ash
for Decoito argues:

1.That
according to Paragraph 5 (iii), Schedule D , the deal was at an
end either on August 14, 2003 or no later than October 26, 2003,
since there were no written documents to extend the closing date
beyond that date and therefore Decoito is entitled to the return of
her deposit of $12,250 plus interest.

2.
Alternatively, if the transaction had been revived by the actions of
the parties the time of the essence clause was not communicated by
Maple View to Decoito or her lawyers at any time. The first
reference in writing to the fact that December 22, 2003 was to be a
firm date in that the terms and conditions of the original agreement
were to be utilized by the parties was in the Amending Agreement
forwarded by Mr. Pollack to Mr. Bhardwaj on December 17. This
document was not signed by Maple View. It was signed only by
Decoito on December 23 after the date stipulated for closing passed.

3.A
reasonable extension to January 5, 2004, ought to have been honoured
by Maple View, since that was the first date after December 23 that
they were back in business following their Christmas vacation, that
it was reasonable under all the circumstances, that Maple View ought
not to realize a $50,000 profit which included the deposit by its
failure to agree to a reasonable extension.

4.
Alternatively, Decoito was poorly represented by her lawyer, his law
clerk, the mortgage broker, and her realtor. She was never informed
by her lawyer or his law clerk that Maple View were taking the
position on December 23, 2003, that the transaction had to close
that date failing which she would loose her deposit and the
opportunity to purchase the home, relying on the doctrine of relief
from forfeiture, she ought to be entitled to the return of her
deposit together with pre-judgment interest.

THE POSITION OF MAPLE VIEW

[20] Ms.
Greenspoon argues that the adjournment to December 22 was made by
Maple View to accommodate Decoito and to assist her in her move. By
the actions of Decoito and Maple View both in correspondence, phone
calls and faxes this was the new fixed date.

[21] She
argues that Maple View acted reasonably and fairly with Decoito in
extending the closing date from December 22 to December 23. They
expedited the construction of the house to accommodate Decoito s
wishes since she had housing problems.

[22] Decoito s
problems were with her representatives, namely her lawyer, his law
clerk, her realtor and her mortgage broker. Their incompetence,
carelessness or negligence ought not to be visited upon Maple View
who did everything possible to accommodate Decoito in an early
closing of the transaction and therefore are entitled to a
forfeiture of the deposit.

THE LAW

[23] In the
case of Matthews v. McVeigh, [1954] O.R. 278 (Ont. C.A.),
the Ontario Court of Appeal held that although time was declared to
be the essence of the Agreement, those provisions as to instalment
payments were never actually carried out or insisted upon between
the parties. Aylesworth J. at p.6 stated:

In these circumstances I think it is
quite clear that the stipulation in the agreement providing that
time was to be of the essence was completely disregarded by both the
appellants and the respondent and ceased to be of any effect upon
the rights of the parties. I think the respondent had no right to
treat the contract as terminated without first giving the appellants
a reasonable time within which to make good their default, upon
notice to them that time was again to be considered of the essence
of the agreement and that unless the default were cured within such
reasonable time she would consider the agreement at an end and
herself free to deal with the property as she might be advised: see
Hutts v. Hancock, [1954] O.R. 105, [1954] 1 D.L.R. 790, and
the authorities therein collected.

merely making a new day for
performance is not sufficient to make time again of the essence,
even if that new day is a reasonable time in advance. The notice
must in some way bring home to the defaulting party that time is
again of the essence or being made of the essence. It is not, as I
apprehended the situation, necessary to use express words
stipulating time to be of the essence. It is sufficient, in my
opinion, to bring home to the defaulting party that if the new day
is not met the party serving the notice will treat the contract at
an end.

The issue to be decided here is
whether one party can unilaterally change the contract so as to make
time of performance of the essence and thereafter if not performed
as stipulated be entitled to rescind it.

In cases where there is default in
performance of the contract and the innocent party is still willing
to complete, notice to complete must be given in such a manner so as
to be clear and unambiguous in its terms with details of the new
requirements being imposed. The notice stipulating the time to
complete in the circumstances then and there prevailing and in
keeping with the history of the matter must not be too short and
unreasonable in order to be enforceable. Rados v. Paconla
Investments Ltd. (1981) 20 R.P.R. 154 (B.C.S.C.); Dobson v.
Dobson (1993) 29 R.P.R. (2d) 228 (Ont. Ct. Gen. Div.); Beacon
Industrial Development v. G.C. Farm Supply (1981) 123 D.L.R.
(3d) 467 (Alta. Q.B.).

[26] In the
case of Woodshire Estates Inc. v. Gregory, [1993] O.J. No.
4235, Paisley J. found that there was no evidence to suggest the
purchaser of a home agreed to an extension. He further found that
the purchaser ought to have known that the closing date was wrong in
the letter and that they were content to let the time period expire
because they were having trouble selling their home. He therefore
ruled that no punitive or exemplary damages were allowed.

Although neither party did anything
on the original closing dates and neither was then ready to close,
and although time was of the essence, the contract remained in
force and either party could establish a new closing date, as the
vendor did. In any event, both parties treated the rescheduled
dates as the new closing dates, since the plaintiff s tendered on
those dates.

The principles governing relief from
forfeiture were considered. Two things are necessary before relief
will be granted. First, the sum must be out of all proportion to
the damage suffered, and secondly, it must be unconscionable for the
vendor to retain the money.

I find that the plaintiff was
entitled to elect under the forfeiture clause to declare the
agreement terminated and to accept the deposit. When one considers
that the plaintiff company was a shell company speculating in land,
that the value of the land was over one million dollars and the
deposit which tied up the plaintiff s land was less than 2% of that
amount, and that it was the defendant that repudiated the contract,
the sum is not out of proportion to the damage suffered, nor is it
unconscionable for the vendor to retain the money. A deposit may be
forfeited without proof of damages.

FINDINGS

[29] I find
that Decoito acted reasonably and properly in her efforts to
complete this transaction. Her problems started with her real
estate agent who according to her attempted to obtain extra money
from her for which he was not entitled. She employed a mortgage
broker namely Shamira Lalani who found mortgagees who withdrew from
their financing commitment virtually at the last minute, December 22
and 23, 2003. Her lawyer Mukesh Bhardwaj and his law clerk Geetha
Narayan failed to protect her properly in obtaining a closing date
extension beyond December 23, 2004. She was not adequately and
properly informed by her lawyer as to what was transpiring with
respect to the closing.

[30] Mr.
Pollack, in his letter of December 23, 2003, left the door open to
the purchaser by stating in the first paragraph of his letter to fax
a copy of the client s mortgage commitment. According to the
evidence on December 23, 2003, later in the day, Mr. Singh was able
to obtain a mortgage commitment from Bridgewater Finance. There was
no evidence that this was communicated to Mr. Pollack.

[31] The
significant issues are:

(i) Was the vendor being reasonable in not extending the closing
date until January 5, 2004;

(ii)
Was December 22, 2003 a proper date for closing since it had not
been confirmed by the parties in writing; and

(iii)
Given the overall dealings between the parties should Decoito be
relieved from forfeiture of her deposit based on the authorities.

[32] I have no
hesitation in finding that the parties by their conduct, agreed to
the extension of the closing date to December 22, 2003. I further
find that the closing date was extended to December 23, 2003.
Decoito has established to my satisfaction that she was in a
position to close this transaction on January 5, 2004, which is
conceded by the defendant. I find that Maple View treated Decoito
reasonably and fairly up to and including December 22, 2003. They
advanced the construction date of her house to accommodate her
including advancing the closing date to December 22, 2003 so that
she could move before December 31, 2003.

[33] I find
that had her lawyer Bhardwaj requested a closing date of January 5,
2004, it would have been probably granted. I find however, that
although Maple View consented to the adjournment of one day to
December 23, 2003, they ought to have agreed to an extension to
January 5, 2004. Lloyd Pollack in his letter of December 23, 2003,
did not close the door on a further extension by requesting a fax of
a copy of Decoito s mortgage commitment together with whatever
information you have from your clients mortgagee advising that funds
are not available until January 5, 2004 .

[34] This is
particularly relevant since Maple View were closed for the holidays
from December 23, 2003 to January 5, 2005. They were clearly not
prejudice in any way by this short extension except for the
forfeiture of the deposit. They made a handsome profit on this
transactions by their refusal to extend the closing date.

[35] Following
the reasoning in the case of Craig et al v. Mohawk Metal Ltd.
and Stockloser v. Johnson. I find that the forfeiture of the
deposit is out of proportion to the damage that has been suffered
and it would be unconscionable for Maple View to retain the money.

[36] Decoito
acted reasonably and fairly throughout the entire transaction and no
fault can be visited upon her for the failure to close. No evidence
was adduced as to why the financing failed other than perhaps
incompetent representation. The defendant would suffer no loss in
the event that a deposit was returned (other than the deposit
itself) in that the property was sold for a substantial sum of money
more than the agreement with Decoito.

[37] Accordingly,
there will be judgment for the plaintiff in the sum of $12,250
together with the accrued interests.

[38] I may be
spoke to on the issue of costs.

___________________________

Justice J.H. Jenkins

Released:
November 28, 2005

Bob Aaron is a Toronto real estate lawyer. He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.Visit the Toronto Star column archives at http://www.aaron.ca/columns for articles on this and other topics or his main webpage at www.aaron.ca.